Identity security and mobile payments are driving merger-and-acquisition activity in the payments industry as large companies strive to keep up with each other and the latest technology.

Indeed, it’s a seller’s market for young and small companies that have cornered any technology related to security, mobile wallets or Near Field Communication technology, says Peter Ognibene, managing director at Berkery Noyes Investment Bankers, a New York-based investment bank.

Overall deals for the financial technology and information sector in 2011 rose 2%, to 271 from 266 in the previous year. But the total value of the deals jumped 45%, to $29.78 billion from $20.52 billion, according to Berkery Noyes,

One trend Ognibene sees driving payment-industry mergers and acquisitions is competition among the traditional credit card models from Visa Inc., MasterCard Worldwide and American Express Co. and from peer-to-peer payment companies such as PayPal Inc. Other drivers include the anticipated growth in NFC, which allows a smartphone to function as a mobile wallet; financial institutions trying to steer customers to bank online to reduce costs; increasing compliance requirements around digital security, identification and fraud prevention; margin pressure on banks making higher efficiency a priority; and governments around the world aspiring to paperless currencies, he says.

Much of the activity involves bigger firms buying very small ones, he adds.

“You’ve got a number of very small technology businesses that sprung up in the last several years as entrepreneurs could anticipate trends in terms of payments and social media and digital wallets,” Ognibene says. These include “large enterprises, particularly in the banking space, which are very slow to innovate; credit card companies doing deals; Google and Oracle doing deals. It’s pretty cutting-edge.”

“Prices can be pretty good,” Ognibene says. “Some of these companies are selling for quite a bit of proceeds despite not having a long track record. Definitely a seller’s market in some of these niches.”